9.4 Some Legal Problems for the Next Age

It is time now to turn from matters of high state and international relationships to consider the interaction of the law and technology in more practical and mundane matters. One area of law that is of specific concern to the development of high technology is that of property rights, for the recent direction of change here may indicate some potentially serious obstacles to the widespread creation of new intellectual properties that would otherwise be a hallmark of the fourth civilization.

Specifically, when a work exists only in electronic form, what rights of ownership are there? More generally, who owns the information that is the basis for the new society, and who owns or may regulate the right of access to it? The same question could be asked of the programs that organize that data and even of the machines on which they run. What will be the status of the books, articles, poetry, and plays that are produced on a word processor and whose originals are stored in non-paper form? Can anyone own the way a class of software looks and feels to the user? Before attempting to answer these questions, it is worth pointing out that these issues have been singled out for detailed examination because they are representative of the manner in which developing technology forces changes to the legal assumptions and institutions of a previous age. It is not intended to suggest that these are the most important legal difficulties, only that they are good illustrations.

9.4.1 An Overview of Current Problems

As the larger manufacturers of equipment have found to their dismay, the more successful their products are, the more likely it will be that someone else will have an identical or "cloned" version on the market in a matter of months. The first company does the expensive research and development, and a host of imitators with little developmental overhead reap the benefits. The authors of best selling programs have also discovered that for every legitimate copy their publishers sell, many pirated ones are distributed. Some pirates have even sold copies of well-known programs under a different name, or have counterfeited the original label.

It is not that the mousetrap designers of older technologies did not face the same problem; after all, there are only so many ways to make wax paper, photocopying machines, or flashlight batteries, for instance. However, it used to take much more time to copy new inventions. The protection of the law was clearer and easier to obtain, and the concept of private property was thought to be a touchstone of Western society, with the law being applied vigorously for its protection.

By contrast, in the early stages of computer development, lawyers sometimes admitted in court that their clients had copied thousands of bytes of computer code for their own version of some machine, but claimed that the original owner had no right to the creation because, as machine readable code, it was not really property. The argument was that once a legitimate creative expression had been reduced to electronic form, ownership was lost, because no one could "own" electrical impulses or codes that can be read only by a machine. Alternately, they claimed that the software expressed a formula in essentially the only possible way, and therefore was not protectable. Adding to the legal difficulties was the fact that there was very little lead time for the copying of either hardware or software. In the former case, it takes but a few months. In the latter, the feat could often be accomplished in a matter of seconds. For heavily copy-protected programs, an expert may have needed hours or days, but all such locking schemes could be broken in a far shorter time than it took to create them. A vigorous race between protectors and pirates developed, and there was often more effort going into this sort of activity than into the production of original programs.

The educational marketplace, where copying was epidemic, suffered the most. Few publishers would enter it, for they knew there was no money to be made when they could sell only one copy of a program to a School District employing a thousand or more teachers. In a celebrated hardware case, judgment was rendered for Apple Computer against the leading domestic maker of imitation Apple ][ computers, and after 1984 such clones were no longer legal in the United States. However, this case was based on the contents of the ROM programs built in to the computer, which had been simply copied by the clone makers. Later, when similar companies copied the IBM microcomputer, they were careful to make new built-in code with the same functionality, but different instructions. By doing so, they were able to get around the earlier judgement, so that current litigation is focused more on software than on hardware. In a later suit over the look and feel of the operating system, Apple claimed that Microsoft had illegally copied the essential substance of its intellectual property by imitating its functionality in the various versions of Windows. Although lower courts ruled that there was no infraction, the suit was resolved only when Microsoft settled out of court in 1997, buying shares in Apple in the process.

Despite the fact that courts in several countries have now also ruled that the creators of computer software can copyright their programs, and despite the subsequent dropping of software protection schemes by most major manufacturers, these problems still exist, and the production of genuinely new forms of software and hardware has suffered. Neither are these difficulties confined to the computing industry, for a similar situation is faced by the manufacturers of pharmaceuticals, who see their expectation of some profit from research and development taken away by inexpensive generic copies of their original drug formulas, and in the face of this, decline to do such work within the boundaries of countries that allow the practices. Canada has recently passed new legislation restoring protection to patent medicines; it remains to be seen whether this deliberate restriction of technology transfer will be more productive and beneficial, or whether it will result in higher costs and profits with little or no public benefit.

A third area, besides patent and copyright, in which property rights have been endangered is that of access to stored information. Many computers that served as information repositories, including those of governments, corporations, and banks, were not at first nearly as well-protected against the casual intruder as they should have been. Consequently, there came to be people who specialized in breaking into computer systems to examine or change the data they found. While there were only a few cases of this sort that gained great public notoriety, there was for a time a widespread underground trade in access numbers and passwords for a variety of installations, and it is still not known to what extent the security of important systems was or is being compromised. This is probably not as much of a problem at the present time, as these few incidents have resulted in much more effective security measures being taken. However, it is not clear what is the extent of liability when a system is broken into and data stolen or vandalized. Is it the fault of the operating system vendor for allowing security holes, the software manufacturer for not plugging these, the owner of the computer for not working around them, or the owner of the data for irresponsibly trusting any of the above?

Another form of vandalism that has become a major problem is the spread of "computer viruses". These are small programs that attach themselves to applications when they are run, and whose instructions cause them to attach themselves to all other programs in the system. At some point, they begin to destroy the hapless owners' data and program files or cause random interruptions during computing tasks. Even in the cases where they merely print messages on the users' screens, they constitute an invasion of property and privacy, and reflect a side of the information age that claims there ought not to be any rules. The computing community has been quick to respond to this threat, and there are a number of "vaccine" programs available to protect systems against such infections or remove them afterwards. Sometimes the virus, or some other destructive behaviour, comes coded inside some otherwise useful program that a person installs and uses. Such a program is termed a "Trojan horse," and while relatively rarer, these can cause as much serious data loss as viruses. Files created under Microsoft's Word and Excel can contain a macro that runs whenever the file is opened. This capability has also been exploited to vandalize other systems.

There is still a feeling both among those who copy designs and programs and among those who "hack" into others' systems that there is no such thing as private property, or ought not to be. "Ideas are the property of the masses" and "information is for the people" are the kind of slogans that they have adopted. Will this attitude ultimately characterize the next age? Will there be no rights of ownership to electronic property in the future? Or, is private property a leftover from the old industrial age, and destined for the same oblivion? On the other hand, if the right to private property ought to be a characteristic of the Information Age, what steps can be taken to ensure that the creators or intellectuals have their interests protected? There is a fundamental conflict here between the need to widely disseminate information and the need to reward its creators in order to allow them a living sufficient to continue their creative activity.

9.4.2 The Present Law

There are already certain rights vested under present law for the protection of intellectual property rights. Usually, these are based on international treaties and conventions. Not all nations sign each treaty, and even for those that do the details vary somewhat from one country to another. In the United States, there are often state laws or court decisions enhancing or limiting such protections further. Thus, the discussion in this section is limited to the principles on which such protections are based. Briefly, there are four general classes of protection, each with certain advantages, and each with drawbacks.

Trade Secrets

If a manufacturer sells a product that is produced by some process or recipe and that technique has been carefully kept a secret, not being published or registered in any way, the secret offers a measure of legally recognized protection against imitators. Even should a disgruntled employee leave and "spill the beans" to a competitor, the law still protects the original owner of the secret. However, if the secret is made public inadvertently, through the owner's failure to protect it carefully, or if it is independently discovered by someone else, all protection is gone. What was secret then becomes part of the public domain, available to everyone. It may in some cases even become patentable by a competitor, and thus lost altogether to the originator.

The advantage is total protection while the secret is kept. The disadvantage is total loss if someone else can discover or legally obtain the secret for themselves. This method is essentially worthless for protecting either computer hardware and software or pharmaceuticals, as the secrets of these quickly become open to an intelligent prober and, as a result this type of protection holds little promise for much of high-tech industry.


Patents are intended to protect devices or artifacts. Typically, they are applied to machinery and equipment, including both consumer items and devices used in the manufacture of other goods. They provide an exclusive right to make the patented artifact for a fixed number of years and are effective in preventing the distribution of identical imitations.

A specific computer may be patentable, for example, as may many of its components. However, mathematical algorithms cannot have this protection, nor can any other intellectual expression that is not a physical device. In a move that has generated considerable controversy, the U.S. Patent office has begun to grant protection to certain processes that are part of various software packages, however. On the other hand, there is no computer (and few circuits) sufficiently unique in an electronic sense that the same end result cannot be achieved in some other way. In practice, there is therefore little in patent protection to prevent another company from building a virtual copy of a computer or other machine, and nothing to prevent others from manufacturing an "improved version". Cheap foreign counterfeits or exact clones can now be kept out of the United States, but many countries have thus far not even taken that step, so that a computer patent in such places is essentially worthless. Moreover, workalike machines are usually so easy to make (and these are often called clones as well) that there is little that can be done to stop very close imitation of computers.

Following the older practice of patenting medicines, and medical machinery, patents have also been sought and granted on genetically engineered life forms--a practice that is sure to create considerable controversy as this field expands. As remarked in Chapter 7, this is likely to worsen if animal life is worked on, the moreso for human genetic modifications.

A patent does have the advantage of blanket protection while it lasts, and where it is enforced. It has the disadvantage of being relatively difficult to obtain and often impractical to enforce, particularly in the case of electronic equipment. It may also artificially inflate prices and deprive the general population of the benefits of the discovery by creating a monopoly for an unscrupulous manufacturer determined to exploit the meeting of needs for all the available cash. In the case of patents on key aspects of software, it may prevent manufacturers of even non-competing software from using some ideas or code in their products. For such reasons, most countries are now limiting drug patents to a smaller number of years, and may do the same in other strategic industries, such as computing. Patent is also an artifact-oriented protection; it is more applicable to industrial age devices than it is to the stock-in-trade of an information driven economy.


This third type of protection has traditionally been applied to printed material, such as is found in books and periodicals. It is supposed to confer on its owner the sole right to make copies of a work, with limited exceptions, such as allowing one copy for study or archival purposes. For instance, it is illegal to make and sell copies of a novel, textbook, or scholarly paper without the consent of the copyright holder, except that copies of insubstantial portions can be made for research purposes.

It is also illegal to copy cassette tapes or record albums, video tapes, sheet music or song lyrics, to make classroom sets of magazine articles, or to distribute to students copies of chapters in supplementary textbooks. Yet, all of these things are done daily in many homes and offices and in virtually every school in North America. This will become even more common as personal copiers become as common as personal tape recorders. The ease of accomplishing the deed have led to an even more widespread ignoring of copyright in the case of computer software.

What taping has done to the record and video industry and the dry copier has done to the music industry is nothing compared to the effect of disk and file duplication on the software industry. The deed can be done in a matter of seconds and in complete privacy. It is nearly impossible to discover afterward unless a "friend" turns the perpetrator in to the offended company. This situation is complicated by the fact that the courts in many countries (including the United States and Canada) took several years to decide that computer software was indeed protected by copyright laws. Yet, despite all these problems, the affected industries do thrive, even if some portions do not grow as expected. The companies that do well achieve success by offering to their legitimate buyers a variety of personal services such as toll free help, continuous updates, and comprehensive manuals that the owners of illegal copies do not have. These successes illustrate that a reliance on the legal protection of copyright may not be necessary; it is apparently possible to grow and thrive even when it is being widely ignored. In recognition of this, most commercial software manufacturers had dropped copy protection schemes from their products by the early 1990s.

Unfortunately for record companies and booksellers, the advent of electronic book and digital music storage has meant the same considerations now apply to their copyrighted materials as well. It is too soon to say what kind of answer can be devised to protect the livelihood of writers and artists.

Copyright has the advantage of being easy to obtain. One does not even have to register the work to get protection, just to ensure that every copy that is distributed carries the standard notice. In the case of small printed materials, tapes, and computer diskettes, however, copyright has the disadvantage of being practically impossible to enforce.

Software License

Some software vendors require their customers to sign an agreement that they will make only personal back-up copies of the software, not give it to another person, use it only as directed, and so on. These documents will often disclaim all warranties or guarantees on the part of the vendor, declare that the purchaser takes all the risks, and state that the customer has only a license to use the software, but does not own it. Such contracts are holdovers from the days when software was designed for and sold to only a handful of customers, or only to a single one. Today, notices like these may even appear inside the front cover of the documentation and state that they took effect when the package was opened.

This form of protection has the advantage, in the case of an actual signed agreement, that the vendor can point to a piece of paper and say, "You agreed!". They are also good for the lawyers who make handsome fees by designing them. However, "contracts" that are discovered only after opening a package are worthless, as are any agreements obtained by duress, false pretences, or accompanied by a failure to disclose material facts. They are also void if their primary purpose is actually to disclaim all responsibility on the part of a vendor. The few such documents that may be legally enforceable from a technical point of view, and provided that they are actually signed by the customer, are of little more value in practise than is the copyright notice. People have been ignoring them, and making copies anyway, and will probably continue to do so. Moreover, in many places laws have now been proposed or passed that limit the validity of these "shrink wrap" licenses. On the other hand, there are initiatives to enshrine them in law.


Sometimes, the hold of a particular manufacturer over a market segment or technology becomes excessive, and the company acts to take unduly large profits, restrain the trade of competitors, and prevent customers from using rival products. In the communications and information storage and retrieval industries, there is a natural tendency toward such market concentrating activities because of the need for standards to make the technology work at all. Many countries have laws against monopolistic business practices. For instance, the United States government forced Standard Oil and Bell Telephone to be broken into smaller entities, and in the late 1990s took on Microsoft over what were alleged to be predatory practices.

However, seeing an actual case through the courts may take many years, and some, at least, of the issues may be moot by the time it is settled. This is particularly so in the computing industry, where product lifetimes are measured in months, and legal times perhaps in decades. Given this time frame, and the sufficient application of money and influence, a company found guilty of illegal practices can probably influence the political process sufficiently to escape penalties and continue the same practices in slightly different ways.

The real harm done by a monopoly is not so much in price gouging and the reduction of choice, but in the stifling or destruction of competition, and therefore of innovation. One could argue that the lack of monopolies in the early days of the small computing industry was precisely the reason for its rapid pace of technological change and innovation. If all common applications were rolled into the operating system, and this became standardized on everyone's desktop, the incentive to compete from outside the monopoly or to innovate from within it would vanish, and the industry could simply stagnate.

What are the courts doing?

After some initial waffling over whether a computer program was indeed copyrightable in its electronic expression, the courts in a number of countries have now given several clear indications that copyright can be applied both to external storage media (diskettes, CDs, DVDs) and to Read Only Memory (ROM) chips that contain programs. Such rulings have slowed down the activities of those who "clone" computers, because an essential part of such a device is usually a large amount of built-in ROM programming. For their part, manufacturers initially responded to the challenge by greatly increasing the amount of code built into ROM so as to make it more difficult for other programmers to build a functional copy or create work-alike code. However, except in flagrant commercial cases, there have been few attempts to bring even large-scale violators to justice. The courts in many countries have yet to follow their U.S. counterparts even as far as the latter have gone, so there is in effect no protection as yet for hardware manufacturers or software authors in such places.

Meanwhile, patents granted on genetic modifications are sure to be challenged, and seem unlikely to be maintained over the long run. The clear direction of change is away from information restriction and secrets; the courts are not unaware of this fact, and are beginning to reinterpret the law in the spirit of the age in which it is applied, rather than in that of which it was written--a trend that can either be welcomed or feared, depending on one's point of view.

The fundamental problem with treating intellectual creations as general information, rather than as property, is the great disincentive this provides to the creators. If they cannot make a living by their creation, and few software authors, book authors, or musicians can, they become less inclined to create again. They devote their time to enterprises that can provide an income, and their creative endeavour is stifled, impoverishing everyone. It is this fact that leads us to search further for some way of achieving the contradictory goals of protection and dissemination.

9.4.3 The Insufficiency of Law Alone

Even if there is a change of attitude on the part of lawmakers to provide clearer protections, there still remain great obstacles in the way of solving the basic problem. Software piracy is encouraged by the very high prices that foster the attitude: "They're trying to rip me off, so it's okay if I do it to them." The ranks of the copiers are swelled even more by the fact that it is easily, quickly, and privately accomplished--generally by amateurs, and that few of these could ever be apprehended even if enforcement officers were to try.

All of this leads some to ask whether unenforceable laws should remain on the books. There can be little doubt that if this trend becomes one of the hallmarks of the new age, electronically expressed "private property" would cease to exist as it is now known and this will sharply reduce the incentive to create such materials. Since it is unlikely that the new society could live with the broad implications of such a change, new approaches will have to be attempted.

9.4.4 Proposed Remedies

Several means have been proposed to improve ownership rights for electronically expressed intellectual work. What follows is a brief exposition of a few of these, with the attendant advantages and disadvantages.

1. Improve Legal Protection

This remedy would be welcomed by lawyers, software authors and publishers, since the present laws could certainly use some clarification. However, the enforcement problem would still remain, and it is unlikely that this approach alone would suffice.

2. Improve Copy Protection

A number of promising new methods have become available to make diskette duplication more difficult. If a foolproof copy protection could be devised, it could solve much of the problem. However, this avenue has looked promising before, but has yielded few results. A combination of built-in serial numbers and machine customized software does hold some promise, and this might be pursued, but the larger software houses have now all bowed to criticisms of inconvenience from their major customers and dropped copy protection altogether. A few have employed a hardware key or "dongle" that attaches to the parallel or serial port of a computer and that is checked for by the software. This has the advantage that the software can be moved from machine to machine, but the disadvantage of inconvenience, especially if the dongle is lost. All things considered, most observers feel that barring a dramatic new discovery, this approach probably has little future.

To a limited extent, the same comments have applied to the security of systems and their data--doors capable of being bolted could also have their security bypassed by a sufficiently clever and patient thief. However, large systems are gradually becoming more secure, and those thieves usually need to obtain passwords from the legitimate users--if they do, it is carelessness that has defeated the security, not superior technique.

3. Software Transmission

Potential users of a work could be required to sign on to a host computer (software server) by telephone and pay a fee for each use. This solution reduces the power of the user's computer somewhat, but does ensure that the program itself is never copied, for it runs only on or by being loaded from the larger remote computer. The local device (a network computer) ends up with comparatively little or no storage for programs, for each use is rented.

This approach would solve the copying problem, but would have the disadvantage of being expensive to implement. It would also remove some computing power from the hands of individuals, but in the long run, it has something to be said for it. The Metalibrary, if ever fully implemented, would provide a fast and operationally inexpensive method of recording all accesses to original ideas or programs and of crediting the author with the fee charged, with a percentage retained by the utility to finance its own activities. Like the earlier suggestion that art could be rented from the owning museums for a fee paid as long as it was displayed, this too could be implemented on a time-related rental basis.

Alternately, if billing information were present in the software itself and were updated at each use in a special non-user accessible section of the individual's Metalibrary terminal, the software could be retained and stored locally by its user and the information on fees charged transferred to the central computer on the next access to it. Indeed, the software could even refuse to run without making such a contact. Of course, there might be people who would try to change the billing information, but if there were only one thing to protect, security could be more sophisticated.

If either style of software rental were adopted, there would also be many who would bemoan the end of the chaotic, free-and-easy era of computing where the power was on individuals' desktops. However, a central system may be the only way to maintain the integrity of either the software or the accounting to pay for it. On the other hand, if a single company controlled this security system and could tax all access, it would rapidly assume power comparable to (or greater than) government.

It seems likely that processes and formulas could be licensed in much the same manner. Such information is not now too difficult to get, but if an automatic method to credit the discoverer existed, it might be feasible to do away with monopolies on its use. The most efficient manufacturer would only sometimes be the originator, but the research and development would not simply be lost to the originator; it would just be reimbursed through royalties instead of profits. This is a technological solution to a technological problem; presumably it will create new problems for later solution, but may have some potential. It is worth remarking that profits are easier to make, and protection less important, when the software is in a constant state of rapid and substantial change. The real crunch comes for the vendors of stable products over the long term; on these the original market can almost always be ultimately swamped by cheap duplicates. This fact forces an eventual resolution to these problems, though it does not suggest what it can be.

A related difficulty arises from the fact that there are often many ways to duplicate the result of a technique without duplicating the technique itself. Should the result be protectable, even though the process is not, or has been avoided? This is the very issue behind several "look and feel" suits launched in the late 1980s by original software vendors against competitors who had created functional work and look-alikes to their programs without copying the actual code. Some courts initially ruled that the "look and feel" is protectable, others the contrary; the latter view seems to have prevailed even though the Apple-Microsoft case was never heard at the highest levels.

4. Lower Prices

The high prices charged for much of the microcomputer software now being sold are also a holdover from the days of low volume production runs for very expensive machines. With some brands already having hundreds of millions of computers installed, a mass market potential exists for well-designed software. Once word processors and computing languages sell for the price of a textbook--say, under $50--much of the incentive for copying will vanish. Of course, many retailers, particularly computer dealers, will resist this trend because of the lower dollar margin involved. Under such circumstances, they would not remain on the scene, because computers would become consumer products and be sold in department stores, and by other general merchants. Bookstore chains would handle software, and sell it as they would their other products.

No set of solutions that fails to address the pricing problem has much chance of success, for the motivation to pirate software is strongly influenced by the economic barriers to owning it. Low prices and no copy protection at all is a better solution than high prices with protection, and some vendors have already discovered this fact. This policy would certainly result in a better utilization of creative energies in the writing of programs, contrasting sharply with the waste inherent in the protect/deprotect cycle.

At the same time, the licensing of drug manufacturing rights, among others, would also help to drive down a range of consumer prices, because this too would promote volume without reducing the long-term return on investment. As this discussion indicates, it may be the case that marketing solutions can sometimes be found for ethical problems.

On the other hand, a near monopoly by a single company of much of an industry probably indicates that no lower-price solution is achievable in that industry without government intervention.

5. Royalties

One answer to the cassette/record industry copying problem has been to impose a surcharge on all blank cassette sales. This is then distributed as a royalty to all performing artists affected, in proportion to their actual sales. The same approach could be taken with blank CDs and DVDs and the accumulated royalties distributed among software artists.

This would have the advantage of redressing the economic injury to the creators of the software, and that is probably the main concern of the industry. On the other hand this approach has the drawback that it deliberately chooses to accommodate to the underlying problem, and appeasement is a policy that can come back to haunt; sooner or later reality must be faced and action taken that leads to a definite solution. Moreover, such a solution is temporary. A given medium is unlikely to remain the primary method of software distribution for long. As indicated above, a royalty on the use of ideas is a better policy, but it can only be enforced by the use of a very large scale and heavily used computing facility such as the Metalibrary.

9.4.5 Summary

The information paradigm itself causes new legal questions to arise, as well as new versions of old ones. If the creators of new ideas are to be encouraged to make a living at such activity, some new form of protection and reimbursement needs to be tailored to the information age. It will likely be a highly technological solution requiring great cooperation and widespread support, but such a solution will help to guarantee that the flow of ideas continues. Full implementation of the Metalibrary is one solution that would encourage continued creation and publication, and provide protection and revenues to the creator, but at low cost for distribution. The drawback of this solution is the potential for control or abuse by a small number of individuals or companies that might be able to exercise effective control over it.

The Fourth Civilization Table of Contents
Copyright © 1988-2002 by Rick Sutcliffe
Published by Arjay Books division of Arjay Enterprises